sprovia logo

Understanding High-Risk Merchant Account Payment Processing: Qualify with Sprovia Today!

In an era of expanding digital transactions, businesses seek reliable payment processing solutions. However, for merchants that fall into the high-risk category, finding suitable processors can pose challenges. At Sprovia, we redefine the criteria for high-risk classification and guide you toward tailored credit card processing solutions. Discover how we empower small businesses like yours to navigate the complexities of payment processing. 

In this article, we are seeking out the best high-risk merchant account services and the best high-risk payment processors. Our goal is to help you partner with credit card processing companies like Sprovia, who specialize in high-risk payment solutions and host merchant services. 

Table of Contents

What is High-Risk Payment Processing?

Navigating the realm of high-risk payment processing is essential for any business type labeled as high-risk seeking to accept credit card payments. These types of businesses face heightened risks of chargebacks and fraud, among other factors. This imposes many challenges for businesses considered high risk to accept credit and debit payments. 

Unlike a centralized authority, the payments industry lacks a universal framework for assessing risk. Instead, each payment processor and bank maintains its own risk assessment standards.

It can be a challenge applying for a high-risk merchant credit card processing account. While some payment providers openly avoid certain industries, others deliberate thorough evaluations of businesses to gauge risk levels before approving or denying applications. Ultimately, a payment processor’s internal risk management criteria dictate the acceptance or rejection of applications.

Which Factors Decide If a Business Is a High Risk Merchant Account Payment Processor?

The term “high risk” is used for certain industries. It’s important to know that many great businesses fall under this category according to banks or credit card processors. While there are specific reasons why a business may be deemed high-risk, here are three main ones:

  1. The business might have a higher chance of chargebacks because of how transactions are processed or the industry they’re in. If a business has more than 1% of its transactions resulting in chargebacks, it’s usually your business is high-risk.

  2. Some businesses operate in industries that are new, unique, or highly regulated, making it harder for banks to support them. If there’s uncertainty due to new regulations or industry standards, the high-risk label might apply.

  3. Businesses that mainly take payments over the phone or through mail orders are seen as a high risk payment processor because there’s no face-to-face interaction. This increases the risk of fraud or chargebacks since the card and cardholder aren’t physically present during the transaction.

Certain industries are considered high-risk, including CBD products, e-cigarettes, and multilevel marketing. Additionally, factors like being new to processing payments, having poor credit, or dealing with controversial products can also lead to being labeled as a high-risk business.

Examples of High-Risk Merchants:

  • Travel Merchants including cruises, airlines and vacation planners
  • Adult industry
  • Firearm stores
  • Furniture Stores
  • E-commerce businesses and stores
  • Gambling Industries
  • Online dating sites and apps
  • Multilevel Marketing Companies (MLM)
  • Vape Shops and CBD Stores
  • Electronic Stores
  • Subscription services or businesses with recurring payment plans
  • Debt collectors
  • Real Estate Agencies

While many merchant services are considered high risk, it may be difficult to find banks and credit card processors, Sprovia works with high-risk merchants. 

Differences Between High-Risk and Regular Payment Processing Accounts? - Understanding how high-risk merchant accounts differ from regular accounts

High-risk merchant accounts differ from regular accounts through various stipulations. A high risk merchant is a type of merchant account that imposes several risk factors. The idea of being classified as a high-risk business can feel overwhelming at first glance. While some payment processors might reject your application outright, others may opt for strategies to manage the associated risks. It can be difficult to find a high-risk merchant processing company to partner with, however, we are here to help you secure and find a merchant account that suits your needs. 

Payment processing companies employ various methods to mitigate risk, which also distinguish between high-risk and standard merchant accounts.

  1. Lengthier application process For high-risk merchant accounts, providers often request extensive information to assess risk profiles and financial history. This may include scrutiny of your business’s processing history, partnerships, and even personal credit records to identify potential red flags like bad credit.

  2. Elevated payment processing fees While standard businesses may face processing fees around 0.3% above the interchange rate, high-risk accounts may incur fees of up to 1.5% plus interchange. While specifics vary, increased risk typically correlates with higher fees.

  3. Cash reserve requirements Some providers institute cash reserves for high-risk businesses, which can take different forms:

  • Rolling reserve: A portion of each transaction is set aside by the processor, often up to 10%, to be released at a later date.
  • Capped reserve: Transactions contribute to a reserve until a predetermined threshold is reached, after which further contributions cease.
  • Upfront reserve: The processor may require an initial deposit from the merchant before processing any transactions.
  1. Elevated chargeback fees Businesses with high chargeback ratios, such as clothing brands, may face higher chargeback fees, ranging from $20 to $100 per incident, to offset the risks associated with excessive chargebacks.

  2. Credit card processing volume caps Some processors may impose limits on transaction volume for high-risk businesses, halting processing once a certain threshold is reached to mitigate the potential for increased risk.

  3. Additional requirements Depending on the nature of your business, processors may impose additional requirements, such as age verification tools for age-restricted products, before approving your processing account. Compliance with these criteria may be necessary for account approval.

Pros and Cons of High-Risk Credit Card Processing

The Cons:

  • Longer Approval Timeframes: Providers partnering with high-risk businesses may have a higher risk appetite, but they still need to reduce their exposure to significant liabilities. Therefore, the underwriting process for payment processing services often takes longer.
  • Higher Fees: As high-risk businesses are more prone to losses, providers may charge more to process their transactions to account for the increased financial exposure.
  • Reserves: A high-risk provider may issue a merchant account with the stipulation that the business owner must also fund a reserve account. In this event, the merchant is responsible for funding a reserve account, where this money is kept aside to cover losses. This can be challenging if you own a business with small margins or minimal cash flow.

The Pros:

  • Advanced Security Measures: High-risk payment processors utilize the most advanced security measures to prevent fraud and chargebacks.
  • Higher Chargeback Thresholds: High-risk payment processors understand their clientele has a greater chance of receiving chargebacks, so they often allow for higher chargeback rates.
  • Reduced Risk of Account Termination: Many payment solution providers are known for suddenly banning industries or merchants, at which point these businesses are left without payment processing capabilities. As high-risk payment processing providers specialize in servicing risky industries, you’re unlikely to suffer sudden account terminations.
  • Freedom to Sell High-Risk Products: If you sell high-risk products, you probably don’t want a merchant account provider breathing down your neck about your business activities. Fortunately, high-risk providers allow more freedom and leniency regarding your business’s operations.
  • Tailor-Made Solutions and Support: These providers offer tailor-made solutions, making it simpler to customize your payment operations.

Steps to Take If You Operate a High-risk Business and Require Payment Processing Solutions

For high-risk businesses seeking payment processing solutions, obtaining merchant services from traditional financial institutions like banks or credit unions can be challenging. While some turn to payment service providers (PSPs) such as PayPal, Square, and Stripe, this approach may not be advisable due to potential account cancellations without warning.

Opting for a high-risk merchant service provider offers protection against unexpected disruptions and safeguards your business from fraud. Unlike PSPs, high-risk payment processors won’t shut down your business abruptly for reasons like product offerings or exceeding risk thresholds. With their industry expertise, they’ll collaborate closely with you to mitigate chargebacks and other risks.

How Sprovia Can Help?

  1. Expert Guidance: With Sprovia’s specialized knowledge and experience in high-risk merchant services. We’ll provide expert guidance tailored to your business needs and industry requirements.

  2. Tailored Solutions: We’ll work closely with you to understand your unique business challenges and customize payment processing solutions that address your specific requirements and risk factors.

  3. Streamlined Application Process: Our team will streamline the application process for you, ensuring all necessary documentation is prepared and submitted accurately and efficiently.

  4. Risk Mitigation Strategies: Leveraging our industry insights, we’ll help you implement effective risk mitigation strategies to minimize chargebacks and other potential risks, improving your overall risk profile.

  5. Ongoing Support: From application submission to account activation and beyond, Sprovia will provide ongoing support and assistance, ensuring a smooth and seamless experience throughout the process.

If you’re looking for a high-risk payment solution to help you accept credit and debit payments then look no further. By partnering with Sprovia, you can navigate the challenging path to accept credit and debit card payments effectively and confidently, knowing that you have a trusted partner by your side every step of the way.

Frequently Asked Questions:

Square, Stripe, and PayPal are favored by many high-risk merchants for their simplified onboarding. However, they often impose higher flat rates compared to traditional merchant accounts and may abruptly terminate high risk merchant accounts without adequate customer support. Certain high-risk industries may face restrictions or account suspensions with these PSPs.

Yes, Sprovia provides high-risk payment gateway solutions, essential for securely processing card-not-present (CNP) transactions. Implementing additional authentication measures is crucial to mitigate chargebacks and payment risks.

Yes, Sprovia facilitates seamless integration of high-risk merchant accounts with popular eCommerce platforms such as WooCommerce, Shopify, and BigCommerce. It's essential to comply with each platform's terms and conditions regarding prohibited products.

While poor credit may hinder access to low-risk merchant accounts, Sprovia offers tailored solutions for individuals and businesses with subpar credit scores. This ensures access to payment processing services to businesses that are considered high risk without requiring pristine credit history.

high risk merchant accounts processing

Schedule a Call with a Sprovia Representative

If you want to find out more or simply have any questions, don't hesitate to fill out the form below. We'll be sure to give you a call!

Sprovia is a div. of Kenpco Enterpises Inc.
7345 W. Sand Lake Rd., Suite 202 – Orlando, FL 32819